One of the first things you will be taught in project management is the difference between a ‘risk’ and an ‘issue’. For those not in the know, an ‘issue’ is something that has happened – and we need to fix it (preferably ASAP); whereas a ‘risk’ is something that has not yet happened but may foreseeably happen, so we need to factor this in.
In any discussion around the pricing of legal services we are faced with exactly the same problem:
- there is an issue – the client has a problem: we can workout how much it will cost to fix it, yet;
- there is a risk, the part we are not sure about, nor are we sure about the scope.
QED: 9 times out of 10 instead of looking at the issue/risk conundrum rationally, we take on the risk blinkers and either price to the issue and/or tell the client we cannot know how much it will cost outside of the risk (hence hourly rates).
Whereas the smart pricer/legal project manager in the room will typically white-board both the ‘issue’ and the ‘risk’ with the client and say to the client:
- This is what we know (the issue). It’ll cost you X.
- This is what we are pretty sure will happen (the risk). It will cost you Y.
- And this is the remote (bad luck it happened element) – let’s reconvene and discuss.
But this is just my take. As always though, would be interested in your thoughts, views, feedback.